The core of Abhijit
Banerjee and Esther
Duflo’s new book,
Poor Economics, can
be summed up by a
single sentence in
the foreword: “[W]e
have to abandon the habit of reducing the
poor to cartoon characters and take the
time to really understand their lives, in all
their complexity and richness.”

The next 250-plus pages do exactly that,
describing and analyzing the choices that
people living on less than $2 a day make.
Those choices tend to make a
great deal of sense after some illumination
and contemplation.
For instance, it’s common for
poor families to invest their entire
education budget in just one
child, usually a son, hoping that
this child will make it through
secondary school, while shortchanging
the other children.
Why? Many families think the
value of schooling comes from getting the
local equivalent of a high school diploma,
not from attending another semester of
school. It would be a waste of resources to
spread the family’s educational budget
among all the children rather than trying to
make sure that one child reaches the brass
ring. Yet the value of education, it turns
out, is linear—each additional week brings
additional value. Helping parents understand
this, the book explains, has far more
impact than building schools; it rapidly
changes their educational choices.

Or consider why it is so difficult to get
peasant farmers to use improved agricultural
methods—such as fertilizer, irrigation,
and improved seeds—that can double or triple
yields. Each of these methods requires
an investment up front, but farmers often
decline them even when they can afford
them (through either subsidies or low-cost
loans). Why? Because peasant farmers know
how risky agriculture is. The cost of crop
failure—whether by act of God or unfamiliarity
with new practices—when you’ve
committed all your resources or borrowed
is more devastating than the cost of barely
getting by with low yields.

In another startling insight, the authors
explore how a program designed to reduce
AIDS prevalence, which encouraged monogamous
marriage among Kenyan teenagers,
likely led to an increase in school dropout
rates and exposure to sexually transmitted
diseases, including HIV. The problem
isn’t that the program didn’t work; it’s
that it worked quite well. The
girls did marry, but the only
men with the financial resources
to marry were older and, as
a result, more likely to be infected
and to expect the girls
to drop out of school and raise
their children.

The book offers such insights
on nearly every page,
covering topics on finance,
food, health, education, and family planning.
Unfortunately, the authors’ primary
approach to finding such insights—the
randomized controlled trial (RCT), the
method used to test pharmaceuticals for
safety and efficacy—often is given more
attention than the insights themselves.
Although methods are important—the
unique insights would not have been possible
without them—the debate over the
pros and cons of RCTs obscures not only
the insights but also the authors’ underlying
theory of change, which deserves far
more consideration.

This theory of change mirrors the education
example above. Social impact is often
conceived as a step function, requiring big
changes to reap rewards. Banerjee and Duflo
conceive of it as far more linear. That means
that a series of small adaptations and tweaks
drives impact and its rewards.

Humans have a bias toward believing in
big changes for big results. But the authors
believe, as Banerjee told me a few years
ago, that “there is no evidence that big
changes are the result of big levers.” That’s
a view that’s taking hold in a wide variety
of areas. It’s on display in Malcolm
Gladwell’s recent writing about innovation
and Tim Harford’s new book Adapt. It’s
also evident in the background of Charles
Kenny’s Getting Better.

In other words, much of the whole enterprise
of attacking poverty is built on
the wrong foundations: the idea that big
changes are necessary to create the world
we want. This foundation is shared on
both sides of the political spectrum. For
want of better descriptors, the “interventionists”
want to invest large sums to remake
the context of the poor all at once;
the “libertarians” want to drastically
change the structure of poverty interventions
and social safety nets; and the “social
impact investors” are hell-bent on
brand-new ideas that scale up rapidly. All
advocate big change.

One of the common critiques of
Banerjee and Duflo’s work is that they
don’t appreciate how hard it is to alter policy
to implement the kinds of changes their
insights into the lives of the poor suggest.
But they do appreciate exactly that—and
therefore they disdain those big changes
entirely. They believe that the path forward
is not better “big thinking” but thinking
small. Improving the lives of the poor measurably
and consistently is primarily a matter
of making a series of small changes in
lots of different domains, changes that
don’t require major political battles or dramatically
changing funding structures.

Banerjee and Duflo, then, are radically
small thinkers. Poor Economics is perhaps
the most thorough indictment of big thinking
in social policy since Jane Jacobs’s The
Death and Life of Great American Cities. That’s
why Poor Economics is vital reading for anyone
serious about confronting poverty. You
may not agree with Banerjee and Duflo’s
conclusions, but the poor will be poorer if
you don’t wrestle with the logic that informs
them.

Timothy Ogden, is executive partner of Sona
Partners and editor in chief of Philanthropy Action. He
blogs regularly for the websites of the Stanford Social
Innovation Review, Harvard Business Review, and
Financial Access Initiative.